It is a genuine pleasure to meet here this evening with my friends from the Fall River-New Bedford area and the Fall River Chapter of the National Association of Cost Accountants. Yours is a profession much in demand in Washington today - for budgets, taxes and appropriations are a major concern as the Administration prepares for the opening of Congress. The Secretary of the Treasury has been juggling the books all he can, determined to balance the budget even if he has to borrow the money to do it. The Secretary of defense has been asking for more money, probably because of the diminishing enlistment rate which followed his announcement that men are now being commissioned as Army nurses. And the Commissioner of Internal Revenue has been trying to figure out how much in taxes he will collect from winners on the $64,000 Question.
There is still another problem of "costs" which I would like to discuss with you tonight - the cost of floods, their destructive power and their control. The disastrous floods of last august, which brought tragedy, hardship and hundreds of millions of dollars of damage to thousands of Massachusetts homes and industries, were the last of a series of heavy floods inundating New England in the past thirty years - including the destructive floods of 1927, 1936 and 1938. It should now be apparent to every New Englander that, no matter how proud we may be of our New England spirit of independence, we must begin to participate more fully in Federal flood control programs. Only in this way will we lessen the grim consequences which will be constantly forced upon us - particularly if, as now seems likely, a new pattern of hurricane paths is being formed.
It is time for New England to demand her fair share of Federal flood control expenditures. In terms of 1955 price levels, the funds authorized by the basic Flood Control Act of 1936 and subsequent acts total nearly ten billion dollars. But New England, a major flood area which requires protection for 10% of the nation's industry and well over 6% of the nation's population, can receive at most little more than 3% of the amount authorized.
But even if we had actually received our 3% of the funds for projects already authorized, New England would have been in far better shape last August. Instead, only about one fifth of the funds necessary for New England flood control projects already authorized has actually been appropriated by the Congress - while in the politically powerful Missouri River Basin, for example, the ratio of appropriations to authorizations is nearly twice as high. Indeed the nation as a whole has received appropriations for a much larger share of its authorized projects than has New England.
Of the nearly one billion, eight hundred million dollars appropriated by the Congress for flood control during the last five fiscal years, all of the six New England States put together received only ten million dollars - or six-tenths of one per cent! It is important to note that, to the total Federal funds appropriated, our area contributed in taxes - for the construction of flood control projects all over the country - nearly ten times as much as the tiny percentage of those appropriations which went to New England. If Massachusetts had been receiving flood control funds from the Congress in the past five years in accordance with her share of the population, or in accordance with her share of contributions to the Federal treasury, our State would have received nearly fifteen times as much as it actually did receive.
These figures are so fantastic, these differences are so great, that they stagger the imagination. How different the month of August 1955 might have been, how much property might have been saved, how many lives might have been spared, had Massachusetts in the past five years received for flood control purposes fifteen times as much as she actually did receive!
The task that lies ahead is clear. Perhaps we cannot increase our share of Federal flood control appropriations by fifteen hundred percent - but I do insist - and I shall insist in Washington - that the flood control needs of Massachusetts and New England be more adequately recognized. This is a task which will require a sympathetic administration, regardless of party, and the unified efforts of every member of the New England delegation in Washington, which - I am happy to say - is now more closely united, without regard to political affiliation, than ever before. But it is a task that will require even more the enthusiastic support of State and local officials, and above all public opinion, in this area. It is your job to determine the projects needed and to initiate, in cooperation with the local offices of the Army Engineers, the request for Federal funds - and it is our job in Washington to follow through on those requests, to see that the funds are appropriated and to stop the short-changing of New England which has penalized us these many years.
On the other side of the flood damage coin is the matter of flood insurance, which - unlike flood control, an activity recognized by practically everyone to be properly within the province of the Federal Government - promises to be a lively and controversial topic during the coming session of Congress.
I do not think there is anyone in this room who would not prefer that flood insurance be handled entirely by our private insurance industry. But the fact is that flood insurance from private sources is virtually unavailable today. Practically none of the billions of dollars of destructive damage suffered by homeowners and businessmen less than two months ago was covered by any flood insurance of any kind. This is perhaps the most glaring gap in the protection offered by an industry which has otherwise insured everything from race horses to the legs of famous actresses.
Thus the alternative to some form of Federal insurance is no insurance at all. This is important to keep in mind. We may criticize Federal insurance, we may lack enthusiasm for Federal activity in this field and we may be very dubious about the success of such an experiment. But we must remember that the only other choice facing us is no insurance whatsoever.
Let us examine the reasons why private insurance companies are unwilling to enter this field - and I think they are very good reasons, in view of their obligations of prudence to their policyholders and stockholders - in order to determine whether these same reasons make Federal flood insurance equally impossible.
In the first place, the insurance industry is understandably reluctant to expand the funds necessary for predicting and measuring floods, surveying the extent of flood damage and erecting projects necessary for flood control in particular areas. But those tasks, which are essential to any rough calculation of the risk to be insured, are quite obviously the duties of the Federal Government, duties which it would be fulfilling whether or not it was in the insurance business.
Secondly, an individual insurance company is unwilling to maintain the large financial reserve necessary to meet the cost of a heavy flood occurring before their flood insurance premiums have accumulated. Congress, on the other hand, can authorize - as it has in the past authorized - an agency to borrow funds from the Treasury should an emergency arise in the early years of its existence, to be repaid subsequently from premium income.
Third, the private insurance industry runs up against 48 different state insurance laws and a multitude of conflicting regulations concerning uniformity of rates, adequacy of reserve and other knotty problems, while the Federal Government, recognizing that state boundaries have no significance in national disasters, would be able to promulgate a fair and yet economically sound program for home owners and businessmen in all parts of the country.
Fourth and finally, no single private insurance company could be assured of a broad base in all parts of the country upon which to spread the risk; it could not be certain that early bankruptcy would not result from the concentration of their insurance in the most vulnerable areas; and it could not foresee with any certainty a reasonable profit within a reasonable period of time. Although the problem of spreading the risk over a broad base will also exist, though to a lesser extent, under a Federal program, it would not face the same financial difficulties - no profit would be needed; no state and federal taxes would be paid; existing personnel could be used; money could be borrowed at cost, or even less than cost, from the Treasury; and, should Congress ever decree that a partial subsidy would be in the national interest, that subsidy would be borne by all and not a few policyholders or stockholders.
Several flood insurance bills will be offered in the next sessions of Congress including one which I have prepared and on which I have been joined by my colleague Senator Saltonstall. But I shall be concerned not so much as to whether it is my bill, or a Democratic bill, or a Senate bill that receives final approval as I shall be concerned over obtaining the best bill possible. It is my hope that all of us in Congress who are concerned about this gap in our insurance system will join forces to bring about the passage of such a bill. We shall need the cooperation of the insurance industry, the backing of public opinion and the assistance of businessmen and cost experts such as yourselves. I hope that we can count on that help in the months to come.
We know the story from the Seventh Book of Matthew of the "foolish man who built his house upon the sand, and the rain descendeth, and the floods cameth, and the winds blew, and beat upon that house; and it fell, and great was the fall of it." But we have also seen that the hurricane-driven floods of New England make little or no distinction between houses built on rock and those built on sand. They pose a menace and a challenge to wise men as well as fools. And if our State is not to fall - and great would be the fall of it - all of us must work together toward a common goal.
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